Silver Outlook: Volatility Now, Upside Ahead

“This is where it’s fun. This is where it’s scary,” says veteran commodities analyst Alexander Campbell.

The former head of commodities at hedge-fund giant Bridgewater warns that silver faces several near-term hurdles that investors may want to see cleared before buying.

That’s how Campbell — once a global macro investor at Bridgewater and now founder and CEO of Black Snow Capital — describes the current trading environment for silver, which has rallied roughly 25% in December alone.

Silver is up an extraordinary 156% so far in 2025, though prices pulled back on Monday after logging their largest one-day dollar gain on record last Friday. Campbell argued as early as February that booming solar demand had already pushed the silver market into a structural deficit.

Even so, Campbell acknowledges in a recent Substack post that short-term risks are meaningful. The most immediate is the potential for tax-driven selling once trading resumes in the new year, particularly for positions held longer than 12 months.

Capital gains taxes fall at that threshold, especially for deep-in-the-money options expiring Dec. 31, giving traders an incentive to hold through the final three trading sessions of 2025 before taking profits.

Another headwind could come from the U.S. dollar, which Campbell expects may strengthen in the near term after a solid third-quarter GDP report. A firmer dollar typically pressures dollar-denominated commodities. He also highlights the Chicago Mercantile Exchange’s decision to raise margin requirements on silver trades effective Dec. 29, a move that reduces leverage and speculative appetite.

Campbell also notes growing commentary around silver’s “overbought” condition and concerns that its sharp rise this year could encourage substitution with copper in industrial applications.

Despite these factors, his bullish outlook remains firmly intact. On copper substitution, Campbell argues that while the case may hold over the long term, the roughly 18-month payback period required to retool facilities is too long for solar manufacturers to justify today.

He adds that the solar industry — one of silver’s largest sources of demand — remains economically viable even with silver priced at $134 an ounce, roughly 70% above current spot levels.

A major development on the immediate horizon is China’s new export-licensing rules, set to take effect Jan. 1. As a key net exporter, China’s annual silver output of about 121 million ounces will now require government approval to leave the country.

Campbell sees today’s elevated physical premiums as especially telling. Physical silver is trading near $91 an ounce in Dubai and $85 in Shanghai, compared with around $75 on COMEX futures. “When physical diverges this sharply from paper,” he says, “one of them is wrong — and historically, it’s not physical.”

Backwardation in London’s over-the-counter silver market — where spot prices exceed forward prices — is now the steepest in decades, according to Campbell. At the same time, options markets are pricing in significant upside tail risk.

Technical signals also support higher prices. Commodity Futures Trading Commission data show no extreme positioning, suggesting there is still “fuel left,” while silver-backed ETFs such as the iShares Silver Trust are still catching up to underlying demand.

Ultimately, Campbell says silver’s most powerful drivers are structural. He points to “inelastic” demand from solar — estimated at 290 million ounces in 2025 and rising to 450 million ounces by 2030 — alongside growing data-center needs. “Every AI query needs electrons,” he says. “The marginal electron is silver. Solar needs silver.”